Daily Commentary

MarketMinder’s View: The Bank of England (BoE) held its main interest rate at 3.75% today, though the decision to do so was close (a 5:4 split among the Monetary Policy Committee [MPC], with Governor Andrew Bailey casting the deciding vote). This piece illuminates MPC members’ reasoning and, in that sense, is interesting. But we think it goes too far in suggesting the MPC made a mistake by not cutting rates and making loans and mortgages a little cheaper, thereby squeezing UK businesses and households. We think that vastly overstates how monetary policy works in general—it is a blunt tool that mostly influences money supply growth, which affects the broader economy at an undetermined lag. Now, it is true that in the UK, the abundance of floating-rate loans means rate cuts get passed to borrowers pretty quickly, giving households more financial wiggle room. But the broader effects are limited, and as far as cultivating new investment—which drives economic growth—a rate cut wasn’t going to ease credit access overnight. That misperception aside, the analysis here breezes over some positive developments while focusing on the negatives. For instance, “The monetary report says inflation is going to tumble by one percentage point by April compared with a forecast in November. That means the Bank will reach its target of 2% earlier than expected, falling into line with France, Germany and the EU average.” Take all forecasts with a grain of salt, but that would be good news! Yet the article dismisses that projected improvement and focuses on a higher-than-forecast unemployment rate and downticks in projected GDP growth. We aren’t pounding the table for the UK economy, but things aren’t as poor as many experts think—more evidence that the proverbial wall of worry is higher overseas.

MarketMinder’s View: While we wouldn’t go so far as to say we are cheerful about global trade—tariffs are higher today than they were 12 months ago, which isn’t great—there are a lot of sensible nuggets here highlighting the economic resilience of the US and nations abroad. For instance, “US imports in value terms surged early in 2025 to get ahead of [President Donald] Trump’s tariffs but have since returned to normal. Despite a downward blip in imports in October, reversed in November, the US shows few signs of ceasing to be a source of global demand. … [Trade between the US and] south-east Asia and to a lesser extent Europe have increased, while those from Canada and Mexico have held up surprisingly well.” The article’s second half points out the dealmaking among the non-US nations (e.g., the EU and India), another underappreciated positive development for the global economy. The conclusion acknowledges the possibility of a shock derailing commerce (e.g., China invading or blockading Taiwan), which, sure, we agree could be a massive negative depending on the scale of the disruption. But investing is about probabilities, and the risk of a major geopolitical conflict, while possible, doesn’t seem probable today. To us, the focus on a global trading system weathering tariffs without catastrophe further confirms the world has moved on, dampening tariffs’ and other protectionist policies’ negative surprise power. For more, see our January commentary, “Trade War Fears Remain Unsubstantiated.”

MarketMinder’s View: Don’t look now, but Europe’s largest economy continues to deliver better-than-forecast results. December factory orders rose 7.8% m/m after a 5.7% climb in November, and the underlying categories were broadly positive, too. “Large-scale orders drove the increase, though even when these were excluded, the figure was still up 0.9 percent from the previous month. Orders for metal products climbed by over 30 percent, and there was also significant growth in orders of machinery and equipment, computer and electronic products.” (Orders for autos and other transport equipment did fall, though.) Interestingly, the reaction here was generally upbeat, with one publication proclaiming, “Industry is booming!” We wouldn’t go that far—two months of data, positive or negative, aren’t a trend. But considering how glum moods have been toward Germany over the past four years, we won’t pooh-pooh a little positivity. For more, see our January commentary, “UK and German GDP Teach a Timeless Lesson.”